The JRG Group

4/16/12

CRESCENT CENTER DEVELOPMENT Market Overview Report

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Table of Contents

I. Executive Summary

II. Site Map

III. Site Analysis

IV. Regional Analysis

V. Retail

VI. Office

VII. Hotel

VIII. Multi-Family

IX. Suggested Use

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TEAM MEMBERS John Longshore

Gabe Chatham

Rob Villa

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EXECUTIVE SUMMARY The Crescent Center is a forty-acre property located off of Woodruff Road in Greenville, South Carolina. It is located in a highly convenient area between Interstate 85 and 385 in a highly concentrated developed area. Large retail developments such as Magnolia Park and The Shops at Greenridge attract numerous shoppers to the area. Just to the southeast there are large office developments such as CU-ICAR and the Millennium Campus.

Due to the high amount of traffic volume the area can still support extra retail, approximately 100,000 sf. However the office market is fairly saturated and it is not advised to add any significant office space to this area.

Around the site there are currently four hotels but within the Woodruff hotel market there is no luxury style hotel. Due to the amount of business traffic and executives brought into the office developments nearby there may be demand for a higher end hotel.

Just behind the Crescent Center site is a newly developed apartment complex with approximately 350 units. This fact combined with other nearby apartment complexes, currently present a great immediate need for multi-family. The location near retail and office, along with new job creation presents the potential for future demand. It is suggested to wait and track absorption and rental rates of the new units that are being brought to market.

Overall, the site is a great piece of property in a great location. To create a successful development in this current market it will be necessary to make this site be a destination for the shoppers in the area due to poor visibility off of Woodruff. Due to the lack of retail development along Millennium Boulevard, the site can also provide a much-needed amenity to the office complexes while preventing them from getting on Woodruff.

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SITE MAP

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SITE ANALYSIS Description

The site currently sits on approximately 40 acres of a former warehouse site. The land is located near the southeast corner of the intersection of Woodruff Road and Interstate 85. Situated behind The Point shopping center off of Woodruff, the site is bordered by Carolina Point Drive and Market Point Drive.

Surrounding Development

From Verdae Boulevard to SC Highway 14, Woodruff Road is an undivided multi-lane road. The road is filled with numerous commercial developments. Other than The Point, other large-scale commercial developments near the site include the Shops at Greenridge and the Magnolia Park Town Center. Many other shops and restaurants are located along this corridor, with over 120 curb cuts and approximately

Lining Carolina Point Drive and Market Point Drive are various retail and commercial developments. The majority of Market Point Drive is lined with restaurants while Carolina Point Parkway has a few hotels. Carolina Point Parkway leads to the large office developments of the Millennium Campus and CU-ICAR.

Strengths

The site is between the intersections of Interstate 85 and 385, the two major interstates running through Greenville. The easy access to Woodruff Road has helped drive the demand for development. High traffic counts; new office, and new residential developments have contributed to the prosperity of new businesses.

The new developments of CU-ICAR and Millennium has opened up the Carolina Point Parkway to potential development. Beforehand Carolina Point would not have been a significant thoroughfare, and would have made the

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development of this site extremely difficult. The Crescent Center site can allow the employees of CU-ICAR and Millennium a place to go without getting on Woodruff.

Weaknesses

Woodruff Road is one of the most congested areas in all of Greenville. The road has developed very linearly which allows the traffic to back up. The traffic is at its worst between the intersections of I-85 and I-385, which is right where our site is located. Many residents avoid the Woodruff Road area due to this problem.

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Current Land Use

Office: Blue Retail: Red Residential: Yellow Industrial: Purple

The above land use analysis was done by Kimley Horn Associates in 2007. The interchanges of I-385 and I-85 are surrounded by extensive office and retail. As you head east the development changes heavily into residential.

Newer development that is not included on this map is the Verdae Development. When you include this large master planned community, residential development will “bookend” the commercial and office development.

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REGIONAL ANALYSIS Regional Location

Located directly on Interstate 85, Greenville is between the major cities of Charlotte, North Carolina, and Atlanta, Georgia. Interstate 385 allows easy access to Interstate 26 and to the Port of Charleston.

Population Size

Greenville County is the most populous county within the state of South Carolina, ahead of Richland County and Charleston County. The 2010 Census estimated that Greenville County had a population of 451,225, a 70,000 increase from the 2000 census.

Greenville County is located in the northwest portion of South Carolina and borders the state of North Carolina.

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Population Growth

The population of Greenville County has seen steady growth over the past few decades. It is estimated that the population will add close to 100,000 people by 2030

Greenville County added approximately 70,000 people between 2000 and 2010. The county is projected to grow to 544,000 by 2030

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Demographic Summary of Greenville County

Population

• Male: 48.6% • Female: 51.4% • White: 73.8% • African American: 18.1%

Educational Attainment

• Bachelors: 30% • High School: 84%

Households:

• Total HH: 171, 233 • Persons Per HH: 2.48 • Homeownership Rate: 68%

Income

• Median Household: $46,823 • Per Capita: $25,931

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Downtown Greenville

Due to concentrated revitalization efforts, downtown Greenville has become one of the most desirable areas in the entire region. With over 90 restaurants and amenities such as Falls Park, the Peace Center, and Fluor Field, downtown Greenville is a destination for families from many of the surrounding counties. Some of the most recent hotel developments have occurred in Greenville to meet the demand.

The prosperity of downtown can also be contributed to the location of various office developments. Over 3 millions square feet of office space exists downtown, with an occupancy rate of 84% (2nd Quarter of 2011). The prestige and attraction of Greenville is continuing to pull in new tenants.

The rich diversity of work and entertainment is making this area one of the most desirable places to live.

Suburban Greenville

The past few decades have seen development follow the two interstates of Interstate 85 and 385. Typical suburban sprawl has accompanied this growth, with very low density development occurring away from downtown. There is nearly a complete reliance on the automobile, as close to 84% of the working population drives alone.

As with Woodruff Road, most of the development along the various arterial roads are characterized by “big box” retail and are designed specifically for the automobile. There are a significant number of large employers that have also located in this area.

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Major Employers

Greenville County is home to numerous Fortune 500 companies and has the highest concentration of corporate headquarters in the state of South Carolina. International companies such as Michelin, Fluor, and General Electric call Greenville County home and are some of the largest employers in the county. The headquarters of Hubbell Lighting and TD Bank are also located in Greenville County. TD Bank will create over 1400 jobs over the next few years.

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Economic Growth

Job creation has seen significant increase in Greenville County over the past four years. Since 2008, job creation has increased by 100%. Amy’s Foods, Scio Diamond Technology, Bosch Rexroth, and TD Bank are some of the major companies who have helped increase economic growth within the past year.

In Greenville county, new job creation and capital investment has steadily increased since 2009

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Unemployment

The recent nationwide economic downturn affected South Carolina significantly, with unemployment peaking over 12% during the middle of 2009. Greenville consistently fared better than the state of South Carolina, never rising over 10.5%. Currently the unemployment rate is approximately 7%, a significant difference between the U.S. and South Carolina unemployment.

As of January 2012, the unemployment rate in Greenville County was 7.1%

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RETAIL Overview

This market overview serves as an examination of the retail real estate market in Greenville, South Carolina and the surrounding communities. The purpose of this market overview is to assess the viability of office space for a development site located between Carolina Point Parkway and Market Point Drive near Woodruff Road and Interstate 85. The subject site is currently underutilized and tarnished by the stigma of previous unsuccessful projects located on the site.

National Retail Market

The national retail market has been slowly recovering since 2007. The national market has continued to gain strength with low vacancy rates and continuing positive net absorption. The data nationally has continued to improve mainly because of the low construction activity on a national level and the willingness of landlords to lower rental rates in order to fill existing vacant space. Retail is considered to be one of the lagging sectors of the real estate industry and as the overall economy continues to improve, the retail sector of real estate is beginning to improve. Retail is dependent upon consumer spending and when people and as people begin to feel more and more confident about the economy, consumer spending will increase.

The figures below are the major market indicators for the U.S. Retail Market (all figures at the end of Q1 2012):

• Retail Inventory: 12,339,423,721 square feet • Vacancy Rate: 6.9% (unchanged from the previous quarter) • 1st Quarter 2012 Absorption: Positive 9,529,040 square feet • Average Asking Rental Rate: $14.58/sf/yr

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The chart above illustrates the construction activity in the national retail market. The average construction activity over the past 30 years is approximately 180 million square feet per year of new retail properties. The chart above shows the steep drop off of activity from the peak in 2006. In 2011, the last full year of construction, only 43.6 million square feet was delivered across the nation.

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Regional Retail Market – Greenville/Spartanburg

The Greenville/Spartanburg retail market is compromised of properties in Greenville, Spartanburg, Anderson, Cherokee, Pickens, and Laurens counties. The upstate region, with Greenville/Spartanburg being the core, has seen gradual improvement since 2009 in the overall health of retail real estate in all product types. Vacancy rates have dropped consistently, net absorption has been positive for several quarters, construction activity has been very low allowing for existing space to be absorbed, and rental rates have increased.

The figures below are the major market indicators for the Greenville/Spartanburg Retail Market (all figures at the end of Q1 2012):

• Current Inventory: 80,322,692 square feet • Vacancy Rate: 6.9% • Net Absorption: Positive absorption of 233,144 square feet • Average Asking Rental Rate: $9.79/sf/yr

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The above graph illustrates the decline in asking rents mirrored by the declining vacancy rates over the past 10 quarters. The sporadic nature of the rental rate in the graph shows the willingness of landlord to adapt their rental rates to the current market situation. Landlords have recently been willing to lower their rentals rates in order to fill vacant space. The Greenville/Spartanburg market has been able to recover quickly than some other markets because of the flexibility of the landlords and their ability to respond quickly to market changes.

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Local Retail Market – Greenville County – East Butler Road Retail

Within Greenville County retail market there is 34,943,349 square feet of retail space. The vacancy rate in the county is currently 5.9% with a year to date absorption of positive 79,171 square feet. Greenville County had a very strong first quarter of 2012 with continued success in leasing existing vacant space. This success has led to declining vacancy rates, consecutive quarters of positive net absorption, and rising average asking rental rates. The average asking rental rate in Greenville County is $10.93, an increase from the previous quarter and a continuation of a trend of rising rental rates that began earlier 2011. Greenville County currently has the highest asking rental rates in the entire region.

The subject site is located in East Butler Road. The submarket is bound by I-85 to the Northwest, Shannon Lake Circle to the North, State Highway 14 to the East, Bridges Road to the South, and Miller Road to the West. These submarket boundaries were established by CoStar Group. The site sits on the border of the East Butler Road and West Butler/Mauldin Road retail submarkets. The overall health of the West Butler/Mauldin submarket will affect the potential retail uses located on the subject site making the need for analysis of West Butler/Mauldin Road submarket very important.

The figures below are the major market indicators for the Submarket Retail Market (all figures at the end of Q1 2012):

• Inventory: 2,841,266 square feet (E. Butler Submarket); 1,837,352 square feet (W. Butler/Mauldin) • Vacancy: 4.9% (E. Butler Submarket); 2.1% (W. Butler/Mauldin) • Net Absorption: Negative 13,564 SF (E. Butler Submarket); Positive 23,455 SF (W. Butler/Mauldin) • Average Asking Rental Rate: $15.89/sf/yr (E. Butler Submarket); $9.37/sf/yr (W. Butler/Mauldin)

The East Butler and West Butler/Mauldin submarkets are traditionally strong retail areas in the City of Greenville. The majority of the traffic to the area is coming to the submarket to access the retail on Woodruff Road and the surrounding area. Many projects containing retail uses have been built in the last several years in the area. An

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amenity that the subject site will need to take advantage of is the office users surrounding the site. The employees of the office buildings within a short distance of the subject site would benefit from having a retail use that is not located directly on Woodruff Road because the employees would not need to fight the traffic on Woodruff Road during lunch hour or after work.

A challenge that the development team will need to be cognizant of is the amount of new or proposed development that will be occurring in the surrounding area. Woodruff Road is a very popular area in the Greenville/Spartanburg region and has been targeted in the past by many developers and retailers as an area for possible investment. Many projects were derailed by the economic downturn that has occurred since 2008 but there are several proposed and ongoing projects that the development team will need to keep an eye on. The first project that currently underway is a project called Verdae. The development is 1,100 acre master planned community located on the west side of I-85, just south of Woodruff Road. The community currently has one retail center completed called Verdae Village. The retail power center contains nearly 260,000 square feet of retail space and has a 7% vacancy rate. The asking rental rate ranges from $16-$20/sf/yr. This community will contain more retail components as the community continues to be constructed and is an area that the development team will need to analyze before and during any construction of retail uses on the subject site.

The other project that will affect retail uses located on the subject site is Magnolia Park. This project has 550,000 SF of retail space containing a Sports Authority, Rooms to Go, Old Navy, Regal Cinemas, Costco Wholesale Club, and Bed Bath & Beyond. This project has another 520,000 square feet of retail space still proposed and is located approximately 1 mile from the subject site. As Magnolia Park grows and attracts new tenants, the development team will need to assess the subject site’s position in the market and try to find opportunities in the area for new tenants to occupy space in the retail component located on the subject site.

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Demographic Information

The demographic information of a particular area is very important for retailers looking to locate a business in a project. The surrounding area was analyzed from a 5, 10, and 15 minute drive from the subject site and using information gathered from Site To Do Business, the following information was found:

• Total Population in 2010 within 10 minute drive: 99,228 • Total Number of Households: 41,622 • Average Household Income in 2010 within 15 minute drive: $76,267 • Percentage of Population between ages of 20-44: 36.8% • Average Household Disposable Income within a 15 minute drive: $55,636

The demographics for this site suggest that the area surrounding our site is an upper middle class area with a relatively young population. In 2010, the median age within a 10-minute drive to this site was 36.7 years old. These younger individuals are more likely to embrace a new retail development that contains fun and exciting uses and are willing to drive 10 minutes in order to shop at the store of their choice.

The population within a 10-minute drive is expected to grow by a total of approximately 10,000 people to a total of approximately 110,000 people by 2015. The population is expected to have a similar make up to the current population, with the average age of the population to stay relatively the same. The economic make up of the families in the surrounding area is expected to strengthen. According to Site To Do Business, the average household income within a 10-minute drive to the site is expected to increase to $82,444.

An important tool to use to determine the consumer habits and make up of the families in the area surrounding a site is a Tapestry Segmentation analysis. Tapestry classifies U.S. residential neighborhoods into 65 unique market segments based on socioeconomic and demographic characteristics. What results from Tapestry Segmentation is a general idea of the types of families located in the neighborhoods surrounding the subject site. Within a 10-minute drive of the site, the top three tapestry segments are In Style, Young and Restless, and Enterprising Professionals.

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These segments will be further analyzed below:

• In Style – In Style residents live in the suburbs but prefer the city lifestyle. Professional couples predominate. Married couples account for 54% of the families, households without children account for more than two thirds of the households. 42% of the population 25 and older holds a bachelor’s or graduate degree. Residents stay fit by exercising, eating a healthy diet to control their weight, buying low-fat foods, and taking vitamins.

• Young and Restless – This young, on the go population has a median age of 28.6 years. 58% of the household are either a single person or shared with a roommate. This area has a median household income of $46,185. Only 23% of these residents have children, giving them more disposable income. Thirty six percent of resident aged 25 years or older hold a bachelor’s or graduate degree and 69% have attended college. They like attending movies at theaters, enjoy going to bars or nightclubs, and enjoy working out at the gym and playing sports.

• Enterprising Professionals – Fast growing market is home to young, educated, working professionals with a median age of 32.4 years. Single or married the median household income is $69,779. Approximately half of the population over 25 holds a bachelor’s or graduate degree and more than three in four have attended college. Labor force participation is 73.4 percent. This sector is very in touch using cell phones and e-mail; they play video games, visit theme parks, jog, and swim. They shop for groceries at stores such as Publix and Albertson’s.

Looking through the market segment described above, the development team can get a clearer picture of the residents that live within a 10-minute drive from the subject site. In general, the population is young families that are just married with no children or beginning to start a family. The residents of the area enjoy exercising and recreation activities outdoors. The population is educated with many of the individuals holding a bachelor’s degree or at least attended college.

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By examining the findings from the Tapestry Segmentation the potential retailers begin to become easier to identify. By looking at the surrounding population the development team can match the area resident’s interests with the retailers who provide the products that the residents will most likely purchase to support their interests.

Recommendations

As the population in the area surrounding the subject site continues to grow, the residents of the area will continue use the retail uses on and around Woodruff Road. In order for residents needs to be met, additional retail space will need to be constructed over the next several years. Currently the retail sales in a 5-mile radius from the subject site totals $2,921,228,650. According to CoStar, the total retail square footage in a 5-mile radius surrounding the site totals 16,354,380 resulting a total of $178.62 in retail sales per square foot. The population in the area is expected to grow over the next 5 years and continue to grow beyond that.

The development team expects that the retail component of the project located on the subject site can capture 1% of the retail sales in a 5-mile radius surrounding the site. A capture rate of 1% would result in $29,212,287 in retail sales for the retailers located in the project. If the project contained 100,000 square feet of retail space, the retail sales per square foot would be $292/sf. This figure is very competitive for retail stores in the south region of the country and would make the retailers located on the subject site successful in the Greenville retail marketplace. The project will be able to bring in retail sales exceeding the average of $178.62 because of the superior location of the subject site partnered with the surrounding mix of uses. The project located on the subject site will benefit from the office uses surrounding the site because employees will cause the daytime population to swell in the immediate area allowing for retailers to take advantage of employees shopping at lunchtime and after work. On the evenings and weekends, the area will be populated by the residents of the surrounding area and as this population continues to grow over the next several years the retail uses located on the subject site will continue to gain market share against their competitors in the area.

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OFFICE Office Market Overview

This market overview serves as an examination of the office real estate market in Greenville, South Carolina and the surrounding communities. The purpose of this market overview is to assess the viability of office space for a development site located between Carolina Point Parkway and Market Point Drive near Woodruff Road and Interstate 85. The subject site is currently underutilized and tarnished by the stigma of previous unsuccessful projects located on the site.

National Office Market

The U.S. Office market is continuing to gain strength with vacancy slowly decreasing as net absorption continues to see positive gains. While all regions are performing differently, the overall data for the nation show slight improvements. Most analysts consider office to be one of the lagging sectors in the perceived recovery along with retail. Office real estate is largely dependent on employers filling office space with employees and as the national economy continues to slowly improve, office real estate continues to follow the same trend. Most recently, the economy added approximately 120,000 jobs continuing the downward trend for unemployment statistics. This will continue to fuel optimism that the U.S. economy is recovering from the recession that was felt for the past several years.

The figures below are the major market indicators for the U.S. Office Market (all figures at the end of Q1 2012):

• Office Inventory: 10,144,311,249 square feet • Vacancy Rate: 12.2.%; Class A Vacancy Rate: 14.0% • 1st Quarter 2012 Absorption: Positive 14,788,087 SF; Class A absorption: Positive 6,870,583 SF • Average Asking Rental Rate: $21.34/sf/yr; Class A Office: $26.87/sf/yr (increase from the previous quarter)

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The chart above illustrates the lack of construction activity in the office market in the United States through the past several years. The low construction activity has allowed landlords to fill their buildings and has improved the health of many markets by decreasing vacancy rates and increasing positive absorption for extended periods of time.

The United State office market is slowly improving. The market has seen decreasing vacancy rates and positive absorption for several consecutive quarters and the positive trends look to continue. As construction activity continues to slow, landlords will be given the opportunity to fill existing vacant space and improve the overall health of their buildings and their markets.

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Regional Office Market – Greenville/Spartanburg

The regional office market consists of Greenville, Spartanburg, Anderson, Cherokee, Pickens and Laurens counties. “The Upstate” as the area is commonly referred to is experiencing slow improvement, as of the first quarter of 2012. Vacancy rates have decreased, net absorption has continued to increase, and construction continues to be very slow. Rental rates have continued to decline as owners try to attract tenants to their vacant office space.

The figures below are the major market indicators for the Regional Office Market (all figures at the end of Q1 2012):

• Office Inventory: 35,093,183 square feet; Class A Office Space: 6,050,112 square feet. • Vacancy Rate: 10.0%; Class A Vacancy: 15.4% • Net Absorption: positive 219,027 square feet • Average Asking Rental Rate: $14.55/sf/yr

Greenville/Spartanburg has mirrored the rest of the United States in terms of construction activity. The market only delivered 31,423 square feet of office space in the first quarter of 2012. Construction numbers have been drastically lowered from their averages at the peak of the real estate market. The chart on the next page illustrates the drop off in construction and the positive net absorption figures over the past several quarters. This charts shows the market has been striving to absorb existing vacant space rather than constructing new space and absorbing the newest building in the market. Greenville/Spartanburg is set to deliver 254,428 square feet of office space in the next coming quarters, the most notable building being under construction is 1 North Main Street in Downtown Greenville. The project is 175,000 square foot building is currently 83% pre-leased.

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Local Office Market – Greenville County - Woodruff Road/I-385 Corridor

Within the Greenville County office market there is 23,630,686 square feet of inventory. The vacancy rate currently sits at 10.8% with 135,694 square of positive net absorption through the first quarter of 2012. Greenville County had a very strong in the first quarter of 2012 and continues its trend of growing positive net absorption and falling vacancy rates. Average quoted rental rates in the Greenville County office market are $15.13, a decrease from the previous quarter, mirroring the trend around the entire regional office market. Greenville County has the highest rental rates of any of the submarkets in the Greenville/Spartanburg office market.

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The subject site is located in the Woodruff Road/I-385 Corridor submarket. Parkins Lane and Wembley Road to the West, Haywood Road to the North, I-85 to the Northeast, Batesville Road and Adams Mill Road to the East, and Bi Lo Boulevard and Corn Road to the South bind the Woodruff Road/I-385 Corridor. These boundaries were established by CoStar Group.

The figures below are the major market indicators for the Submarket Office Market (all figures at the end of Q1 2012):

• Submarket office inventory: 4,076,362 square feet • Vacancy Rate: 18.9%; Class A Office Vacancy: 32.1% • Net Absorption: Positive 393 square feet; Class A Absorption: Positive 3,343 square feet. • Average Asking Rental Rate: $18.97/sf/yr; Class A Asking Rate: $22.27/sf/yr

The Woodruff Road/I-385 Corridor submarket has had some difficulties over the past several quarters. One building that is of significant concern is a property located at 1200 Brookfield Boulevard. The property is a 216,000 square foot Class A office space that is currently 100% vacant. The property went vacant in the first quarter of 2010 and has been vacant ever since, according to CoStar Group. The building accounts for nearly 5% of the entire Woodruff Road/I-385 office market and is pulling down the entire market. In order for office use to be feasible, the future plans or intentions of this building will need to be identified. On a positive note, the Woodruff Road/I-385 office submarket has had some recent news that will boost the area and give the office tenants something to be excited about. TD Bank, a subsidiary of TD Bank Group headquartered in Toronto, Canada, has recently announced that they will located their southeastern regional headquarters on Carolina Point Parkway. TD Bank will be occupying 225,000 square feet of Class A office space in the former Carolina First Corporate Campus. TD Bank acquired Carolina First’s parent company and will expand operations in Greenville and more specifically the Woodruff Road/I-385 Corridor over the next several years. They intend to bring approximately 1,600 employees to the area, which will

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house their entire operation. The news of TD Bank’s commitment to the area will help the office market in the Woodruff Road submarket. Many companies will choose to locate their offices near TD Bank’s regional headquarters in order to take advantage of the agglomeration of industries. Many businesses and individuals will be able to form incredible relationships with TD Bank in order to service their needs for their headquarters operation.

With the recent news regarding TD Bank along with the increased presence of CUICAR, Hubbell Lighting, and General Electric in the surrounding area, the Woodruff Road/I-385 Corridor is poised to be a suburban office node in the Greenville/Spartanburg market for years to come. Although, for this area to be successful the Woodruff Road/I-385 Corridor will need to absorb the existing vacant space in the submarket while keeping construction activity to a minimum.

Demographic and Employment Information

All the demographic information provided in this section of the Market Overview is courtesy of the Site To Do Business database and the Bureau of Labor Statistics. Demographic information is particularlly important to office users because business owners and executives look to locate offices and business locations in growing areas with an educated population. By 2015, Greenville County is projected to have a population of 468,020 and by 2030 the county is projected to have 544,000 people. As of January 2012, the civilan labor force in Greenville County was 222,391 with a total population of 443,160. This results in 49.89% of the population of Greenville County being of eligible age and status to be included in the civilan labor force. Assuming the previous percentage, Greenville County will add approximately 11,000 people to the civilian labor force by 2015. By 2030, Greenville County will add approximately another 49,000 people to the civilan labor force. According to a National Association of Realtors study on office space habits in the United States, 41.5% of employees in the U.S. work in an office. Using this assumption, the development team has estimated by 2015 that a total of 4,565 office employees will be added to the Greenville County office market. Our site would be able to take advantage of the growth in employment in Greenville County because of the commuting habits of the residents in the county. Greenville is very similar to many markets around the United States in regards to work commute times. According to Site To Do Business, over half of the people who

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live within 20 miles of the subject site commute between 10 minutes and 24 minutes to work everyday. A vast majority, 83.9%, of these people drive alone to work with a very small number of people, 0.3%, taking public transportation. The subject site has a competitive advantage to other potential development sites throughout the city because of the site’s proximity to I-85 and I-385. Workers can continue to live where they choose to live, mainly in the suburbs, and have easy access to a transportation network that will bring them to work quickly.

Recommendations

The subject site is strategically located on Woodruff Road with incredible access to I-85 and I-385. The site is located in a submarket that contains a large amount of office space within a short distance from the subject site. The site is poised to take advantage of the growth of the larger office tenants in the area but the advantage will not be realized for some time. The submarket has been the hardest hit office area of the Greenville County real estate market. The area has very high vacancy rates in all building classes and has several proposed buildings that have been put on hold until the market regains strength. Two of these proposed building are located within 3 miles of the subject site. Magnolia Park is a proposed mixed use development located at 1025 Woodruff Road. It will contain 375,000 square feet of office space. Verdae is a master planned community located 2.5 miles from the subject site, the development will contain several office buildings. Verdae currently has 161,724 square of office space with a 33.5% vacancy rate.

With the proposed development in the area along with the high vacancy rates of the existing office space, an office component for a project located on the subject will not be feasible at the current time. There is an extraordinarily high amount of vacant space still available in the Woodruff Road/I-385 Corridor submarket and although the recent news regarding the tenants in the area is positive, the area still has a lot of work to do to reach equilibrium and become a viable office development opportunity for individuals or companies.

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HOTEL Occupancy

Three Year Occupancy (%)

Sun Mon Tue Wed Thu Fri Sat Total Year

Mar 09 - Feb 10 33.6 50.9 59.2 59.2 52.2 54.4 53.7 51.8

Mar 10 - Feb 11 39.5 58.1 67.5 68.2 60.0 61.2 60.7 59.3

Mar 11 - Feb 12 42.5 63.6 73.7 73.9 64.8 63.5 63.9 63.8

Total 3 Year 38.6 57.6 66.9 67.2 59.1 59.8 59.5 58.4

Occupancy has been trending significantly positive over the last three years. From the time period of March 2009-February 2010 to the same period in 2011-2012 the occupancy is up 12% to 63.8%. Although every day of the week is up over the last three years, the weekday occupancy is especially strong indicating that business related travel is on the rise.

However, when compared to 2006 rates, occupancy still has not returned to previous levels. In fact, occupancy in 2011 at 62.7% was down 2% from the 2006 mark of 64.7%. If current trends continue, 2012 should be a return, if not an increase, to the 2006 occupancy levels.

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Average Daily Rates

Three Year ADR

Sun Mon Tue Wed Thu Fri Sat Total Year

Mar 09 - Feb 10 69.31 79.26 81.30 80.86 76.72 72.53 73.48 76.69

Mar 10 - Feb 11 69.05 77.35 79.56 79.38 76.20 72.09 72.49 75.61

Mar 11 - Feb 12 70.67 80.92 83.51 83.14 79.88 75.73 75.63 79.12

Total 3 Year 69.72 79.21 81.54 81.21 77.71 73.52 73.91 77.21

Within the three year study of the Average Daily Rate (ADR) for in the selected zip codes has been steadily increasing since 2009 up to $77.21. That is an increase of $2.52 per daily rate with Tuesday, Wednesday, and Thursday showing the strongest gains which indicate a return to business travel.

Although the three-year ADR study appears positive, the ADR has not returned to 2007-08 levels. The 2011 ADR was $78.71 which is still down from the 2008 ADR level of $83.95 (-$5.24). The early returns from 2012 indicate that the year will still not match 2007-08 levels but will be a continued improvement over 2009-2011 figures.

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RevPAR

Three Year RevPAR

Sun Mon Tue Wed Thu Fri Sat Total Year

Mar 09 - Feb 10 23.30 40.34 48.11 47.88 40.05 39.45 39.48 39.76

Mar 10 - Feb 11 27.30 44.94 53.72 54.10 45.70 44.11 43.98 44.84

Mar 11 - Feb 12 30.04 51.47 61.54 61.46 51.80 48.11 48.31 50.45

Total 3 Year 26.89 45.63 54.56 54.59 45.90 43.93 43.96 45.07

The three year RevPAR shows a strong return in the travel market since early 2009 on every day of the week. While Tuesday, Wednesday, and Thursday have shown the most growth, Friday through Monday have all shown solid improvement. The average gain of RevPAR since March 2009 is $10.69.

However, when compared to 2006, the RevPAR results are mixed. The 2011 figure of $49.34 is still not a complete return to the $49. 37 level of 2006 even though the RevPAR statistics are continuing to improve. 2012 could prove to be an improvement on 2006 since the February year-to-date statistics for 2012 have been positive. Even with the positive signs of RevPAR, the study does not take into account the inflation rate over that time period.

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Supply/Demand

Demand in 2011 was higher in each month than any of the corresponding months dating back to 2006. January and February and of 2012 have continued that trend of increased demand. Supply since 2006 has fluctuated between but has peaked at nearly 184,000 rooms per month, or almost 6,000 rooms per day. Since 2006 there have been small incremental annual increases of supply but no significant changes. Between 2006 and 2011 there has been an increase in supply of 12% to a annual total of 2,165,000 rooms. No significant additions in supply are on the horizon for in the target area.

Conclusion

While the recovery in the Greenville hotel market is continuing, the hotels still have not returned to 2007-2008 levels in terms of RevPAR and ADR statistics. Because of easy access to 85 and 385 and the proximity to important employers in the Woodruff Road corridor, the selected site could be used to develop a new hotel. However, because of the lack of frontage on Woodruff and limited visibility to the major traffic corridors, it would be difficult to lure a quality hotel to locate on this site. If more office space is built and occupied then an argument could be made for additional quality hotel space to service the business travelers but a new hotel is not the highest and best use for the property. Further analysis would need to be done on which hotel chains/brands are not in the area and have a desire to locate there. With high attraction stores such as REI and Whole Foods located nearby, a boutique hotel may have interest but because of a lack of visibility to the site the potential of that interest is doubtful.

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HOTELS BY ZIP CODE

Hotels for 29607 (Current Site Location)

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Hotels for 29615 (Roper Mountain Road/East North Street)

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Hotels for 29601 (Central Business District)

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MULTI-FAMILY Nationally, 2011 was an amazing year for multi-family development. According to the 2012 National Apartment Report by Marcus and Millichap Real Estate Investment Services, the inability for many Americans to continue to pay their mortgages and the subsequent foreclosures have resulted in a rise in apartment demand. The forecast for 2012 includes more multifamily developments and acquisitions because of continued historically low interests rates. Fannie Mae and Freddie Mac will continue to be the predominant apartment loan suppliers in a large pool of lenders looking to finance apartments.

Absorption

In the Greenville-Spartanburg (GSP) area, an additional 15,000 payroll jobs are expected to be created during 2013-2014 after a continued recovery after 2012. Development of multi-family properties continues but at a slow pace for the Upstate. Absorption was negative for the first time in the Greenville-Spartanburg-Anderson market because of weak demand. 1100 units were delivered in the second half of 2011 but they were all within two Anderson apartment complexes.

Despite the dip in demand, the Greenville area is expected to see rents and occupancy rise during 2012. The Coldwell Banker Commercial “Blue Book Market Review 2012” summary stated that in the Greenville/Spartanburg submarket the vacancy and Rental Rates are stable with increasing absorption. According to the Wells Fargo and REIS, Inc. study, Greenville was +0.2% in absorption which is better than the -0.1% national absorption.

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Supply

In 2009, 1755 units were added in the Greenville market which is nearly the as were added in the seven previous years combined. Only 216 units were added in 2010. Tapestry Park at Verdae, The Vinings at ICAR, 100 East, Riverwalk, and a potential Cleveland Park apartment complex are all either in the pipeline or have potential for opening in 2012-13. Several complexes are opening in the immediate area and because The Vinings at ICAR project has the opportunity to provide a shuttle stop for shuttles that service St. Francis and ICAR, employees of these companies will be targeted with the new apartments. 1200 new units are expected to open in the Greenville area during 2012. With nearly 500 of the 1200 new units coming online over the next year in the surrounding area, the perceived demand for new apartments appears to have been met.

Occupancy

In 2010, the vacancy rate of units 90+ days on the market was 5.2% in the Greenville market and that rate was even lower near the selected site (4.3%). Among the apartments the Vinings at Roper Mountain, The Carlyle, The Verandas at the Point, and the Preserve at Woods Lake, the occupancy rate was between 92% and 99% which shows strong occupancy in the area.

Rents

In Greenville County, rents improved in 1, 2, and 3 bedroom units in 2010 after modest increases in 2009. The average rents for Type A, conventional units in the county are $800/month for 3 bedroom units, $707/month for 2 bedroom units, and $579/month for 1 bedroom units.

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Greenville Median Rents

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The following were selected because of their proximity to the selected site and their marketing as market-rent, non-age restricted apartments.

Surrounding Apartment Complexes

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Built Units in Greenville County

With 500 units coming available, it is only suggested that multi-family be pursued after the units are stabilized and absorbed.

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SUGGESTED USE

The subject site is located in a high traffic area with excellent visibility from Interstate 85. The property is strategically situated within a short distance from a high concentration of Class A office uses. The surrounding area is very dynamic with a growing population of young, upper-middle class families that are highly educated. The property is situated to take advantage of the mix of property uses in the surrounding area and the strong population base that lives in the areas surrounding the site.

The development team suggests the following uses for the subject site currently named Crescent Center:

• Retail: 100,000 square feet; Mix of retailers and entertainment providers (i.e., new concept bowling alleys, restaurants, nightclubs, etc.)

• Hotel: Upper Upscale Hotel (Hilton, Hyatt, Renaissance, Sheraton) • Multifamily: Pad Sites strategically placed for future development • Office: Not Suggested

These suggested uses are intended to take advantage of the strength of the surrounding community along with the new and existing businesses that occupy space in the office uses near the site. The retail will be available for the office users in the daytime and the surrounding residents during the evening and weekends. The hotel will be used by the executives and business professionals visiting the office users located in CUICAR, Millennium Campus, and TD Bank Regional Headquarters. Multifamily pad sites will be available for further development sometime in the future when the market is not saturated with proposed and new development. Multifamily pad sites will benefit from existing patrons accessing the proposed retail uses and proposed hotel. Office is not feasible at the current time because of the existing Class A office space located a short distance from the site along with future development opportunities by CUICAR and Millennium Campus.